Stalin supports Kerala’s commitment to preserving fiscal federalism

CHENNAI: Tamil Nadu Chief Minister M K Stalin on Tuesday expressed solidarity with his Kerala counterpart Pinarayi Vijayan and said that he would support and extend cooperation to the Kerala government's commitment to preserving fiscal federalism.

Appreciating CM Vijayan for drawing the Supreme Court's attention to the "pressing issue of union government's attempts to stifle state governments by exercising arbitrary and discriminatory control over their deficit financing", Stalin said, "I stand in full support of the Government of Kerala's commitment to preserving federalism. The government of Tamil Nadu is ready to extend its cooperation in this regard and we look forward and synchronize our efforts to address this crucial challenge."

"Seconding the opinion of Vijayan that the subject of public debt for financing the public expenditure of states was within the exclusive purview of the state legislature as per the Constitution, Stalin, in his demi official letter to Vijayan,"

said that the union government has been misusing its powers under Article 293 of the Constitution to restrict the borrowing space of the states.

Alleging that the prior consent from the union government has been converted into a restrictive tool to limit deficit financing beyond the limits prescribed by the State FRBMs, Stalin said that the fundamental principle of fiscal federalism envisioned by the Constitution makers was under grave threat.

"Pointing out that Tamil Nadu has suffered a loss of Rs 6,000 crore in borrowing space in 2023-24 fiscal due to the Union fixing the GSDP growth for net borrowing ceiling at a mere 8% despite TN consistently achieving around 15% nominal growth in the last two years," Stalin said that the mandatory condition of funding gross losses of State DISCOMs under the guidelines for additional borrowing for power sector reforms has forced Tamil Nadu to provide Rs 17,111 crore to Tangedco in the current fiscal, which has severely constrained the state's fiscal space this year.

"The intentional delay in approving the CMRL phase-II project as a Central sector project has resulted in the entire debt of Rs 33,594 crore for the project being included within the state's net borrowing ceiling," the CM said that the discriminatory and unconstitutional attempts are being pushed by the Union at a time when the fiscal autonomy of the state has already been seriously curtailed by the implementation of the GST.

Criticising the union government for not extending the compensation regime despite the state suffering a revenue shortfall of Rs 20,000 per annum in comparison with the pre-GST regime, Stalin said that the intent of the Union government seems to be aimed at crippling the State's ability to raise resources and fund crucial developmental initiatives as per their policy priorities.